Harm theories will guide health probe

Business News / 3 June 2014, 08:00am

Londiwe Buthelezi

Johannesburg - Are any providers of health-care financing using market power to harm competition? Do certain health-care facilities have geographical dominance that creates an uneven playing field? Is the manner in which health-care practitioners direct patients so skewed that it is one of the factors pushing medical inflation above the consumer price index rate?

These are some of the “theories of harm” that the Competition Commission panel undertaking the inquiry into the private health-care sector is planning to explore.

And according to Mariné Erasmus, a health economist at Econex, “the panel is asking the ‘right’ questions”.

The panel has published the draft statement of issues and guidelines for participation for public comment. In the document signed on Friday, the panel listed six “theories of harm” which it said it wanted to test. These were based on the potential sources of harm to the private health-care sector competition that the panel said it had identified. These included market power, barriers to entry into a market, imperfect information, and the regulatory framework.

But the panel emphasised that these theories were not findings of harm but a starting point in the analysis; more could be added as stakeholders submitted comments.

The commission will take public comments up to June 30.

Industry players and commentators have hailed the draft statement of issues as comprehensive. The public sector was a last-minute inclusion. The panel would accept inputs on areas of excellence, such as academic hospitals, that might be imposing some competitive constraints on private hospitals.

But Nicola Theron, the managing director of Econex who heads the competition prac- tice, thought that the inclusion of the public sector created uncertainty as it was not clear who would provide that input.

In analysing the financing of health care, the panel will scrutinise the issue that players on the other side, the hospitals and practitioners, have lashed out at several times: the administrative functions.

The panel said it was interested in the boundary lines between administrators and medical schemes.

And in analysing practitioners’ role in health-care costs, the commission would not only look at underlying costs for services offered, but would also scrutinise their relationship with hospitals.

“Practitioners operate out of hospitals, but Health Professions Council of SA (HPCSA) rules prevent them from being employed by hospitals. However, practitioners may own shares in hospitals.

“The panel wishes to understand the rationale and the implications of these rules for the incentives and actions of practitioners,” the draft read.

The chief executive of the Hospital Association of SA, Dumisani Bomela, said the body would discuss the draft “in due course”.

Discovery Health chief executive Jonathan Broomberg said the draft was comprehensive and seemed to address most relevant issues. “The ‘theories of harm’ are similarly broad and this approach is likely to identify all key factors impacting on the competitiveness and efficiency of our private health-care system.”

The panel intentionally kept the issues raised and theories of harm broad in order not to narrow the focus at this point.

Erasmus said broad as it was, the document provided detailed reference for further research and the important thing was that while the commission followed the UK enquiry format closely, the theories of harm were specific to the South African market.

“In our view, most of the important issues are included and the document provides a detailed reference for further research, comments and submissions,” she said.

The panel would also look at whether consumers had sufficient information when selecting medical schemes or making use of other services in the private health-care sector.

Regulations that might have had unintended consequences and raised the barriers of entry would also likely be identified as the panel would be looking at how the current regu- latory framework affected competitive outcomes.